What’s the Difference Between A Blockchain Currency and Platform
*Before I delve any deeper and anger any economists, when I say currency, I am referring to digital assets with limited functionality like bitcoin, litecoin, etc. I know these don’t meet the criteria for a traditional currency*
The History
On October 31, 2008, a ghost veiled behind a computer screen appeared on the internet. The ghost, Satoshi Nakamoto, has been spooking the established world of governments, banks, and centralized trust organizations with his idea ever since, Bitcoin: A Peer-to-Peer Electronic Cash System. The idea involved a combination of existing technologies like cryptographic time stamps, public key cryptography, a proof-of-work system similar to Adam Back’s Hashcash with an idea to use a chain of blocks to record what happened, between whom, and when. Satoshi was not naive for how his idea could be applied, and with remarkable foresight he drew a community of cypherpunks, libertarians and technologists all of which were inspired with the vision.
Nonetheless, Satoshi’s vision for bitcoin fell somewhat short of some’s dreams and what Wei Dai had written about in his paper bmoney, but for good reason. Wei Dai, in proposing bmoney, wrote about a system for decentralized money and digital contracts. Bitcoin as it was introduced just managed to act as a way to store and transfer value. But, Bitcoin was the first decentralized currency ever to achieve this.
Satoshi saw the need for separating bitcoin from a smart contracts platform. Which should come first, the chicken or the egg? Surely both couldn’t come at the same time, especially when everything was just an experiment. If bitcoin were to fail with a house of smart cards on top of it, the consequences could be far reaching.
In the 1990’s, there were a couple attempts to make non-state issued currencies, namely LibertyDollar & eGold. But both lacked decentralization and were shut down by government efforts citing certain laws and money laundering as a concern. Smart contracts were also used in the 1990’s and even before if you go by the Nick Szabo’s original definition.
“A set of promises, specified in digital form, including protocols within which the parties perform on the other promises” — Nick Szabo
This inclusive definition doesn’t specify the need for decentralization; however, there is additional utility when you consider this feature. Smart contracts are very flexible, and they can be even written to make a currency as illustrated by the hundreds of tokens existing on current platforms that operate mainly as a payment tool for a specific application.
The Platform
A platform, whether blockchain or not, should allow for many people or technologies to exist and launch their careers, products, and ideas. Educational platforms help people gain skills while technological platforms, like Android, allow people to create and distribute tools, games, and applications. Some platforms offer specific needs catering to certain industries while others are more general. Such as an educational platform like coursera having an app in the google play store. The more agnostic the platform is, the broader its scope of use becomes.
Some blockchain platforms want to meet the needs of specific industries such as finance or supply chain. Qtum, on the other hand, is a general purpose platform, although its design enables greater utility to applications that make use of light clients, like the IoT industry.
For Qtum, we are even trying to expand the ability of our platform with our work on the Qtum x86 virtual machine. The Qtum x86 virtual machine has far reaching implications, since it will allow developers to program smart contracts in traditionally used languages like C, C++, Rust, Haskell and more. Many x86 compatible programming languages also have support from battle tested compliers, enabling more security which is deeply need for our industry. This would make Qtum a platform of platforms, since multiple virtual machines can run on top of the blockchain.
A Comparison
There are some differences when looking at currencies and platforms side-by-side. Their goals differ in some ways, but in other ways, they are quite similar. Blockchain currencies and platforms primarily use the blockchain as a settlement layer. In a sense, one settles asset transfers, while the other settles contracts.
One noticeable difference can be found in the designs of two. Most blockchain currencies use the unspent transaction output model. This gives the currencies the ability to execute parallel transactions and offers greater traceability. Nonetheless, this traceability feature can also be a drawback because it decreases the fungibility of the network token. Although, this is being addressed for both blockchain currencies and platforms with multiple competing privacy efforts like ring signatures, schnorr signatures, zkSNARKs and more.
Another difference is the crypto-economics of “currency” token or platform token. Most blockchain currencies take an approach where the token is meant to be a store of value. While, for platforms, the token is used to pay for the computational resources used when executing code with gas. Platforms ideally want to keep computation costs cheaper to encourage more dapps to run on them. A similar comparison would be how Amazon Web Services competes with Google cloud over prices and features. Additionally, “currencies” can be issued on top of a platform easily, however, coming up with a fair distribution model isn’t.
Decentralization for a currency, can be particularly beneficial. Considering the risk of hyper inflation (or just inflation) which has led to recessions and resource conflicts, getting a large amount of people to adjust the inflation schedule of a currency can be particularly difficult since no one would want to purposely devalue their holdings. For governments, however, this can be quite easy and it allows them to consolidate power by printing off money for their corrupt friends. In a smart contracts platform, decentralization makes sure that it becomes increasingly harder to game the system as the network grows to have a contract incorrectly be viewed in your favor.
That’s why Qtum took the unique perspective of combining the two, a currency and platform. We did this through a layered approach, separating each aspect and trying not to compromise the unique advantages of each piece.
Check out Patrick’s speech highlighting the difference and Qtum
